ACC 304 Week 4 Chapter 11 Homework 1) Lockard Company purchased machinery on January 1, 2014, for $102,960. The machinery is estimated to have a salvage value of $10,296 after a useful life of 8 years. 2) Compute 2014 depreciation expense using the double-declining-balance method. 3) Compute 2014 depreciation expense using the double-declining-balance method,

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ACC 304 Week 4 Chapter 11 Homework
1) Lockard Company purchased machinery on
January 1, 2014, for $102,960. The machinery
is estimated to have a salvage value of
$10,296 after a useful life of 8 years.
2) Compute 2014 depreciation expense using
the double-declining-balance method.
3) Compute 2014 depreciation expense using
the double-declining-balance method,

2. assuming the machinery was purchased on
October 1, 2014.
4) Everly Corporation acquires a coal mine at
a cost of $452,000. Intangible development
costs total $113,000. After extraction has
occurred, Everly must restore the property
(estimated fair value of the obligation is
$90,400), after which it can be sold for
$180,800. Everly estimates that 4,520 tons of
coal can be extracted.
5) In its 2011 annual report, Campbell Soup
Company reports beginning-of-the-year total
assets of $6,276 million, end-of-the-year total
assets of $6,862 million, total sales of $7,719
million, and net income of $805 million.
6) Compute Campbell’s asset turnover ratio.
(Round answer to 3 decimal places, e.g.
4.871.)
Asset turnover ratio

3. 7) Compute Campbell’s profit margin on sales.
(Round answer to 2 decimal places, e.g. 4.87
or 4.87%.)
8) Compute Campbell’s return on assets using
(1) asset turnover and profit margin and (2)
net income. (Round answers to 2 decimal
places, e.g. 4.87 or 4.87%.)
Return on assets
9) Rembrandt Company acquired a plant asset
at the beginning of Year 1. The asset has an
estimated service life of 5 years. An employee
has prepared depreciation schedules for this
asset using three different methods to
compare the results of using one method with
the results of using other methods. You are to
assume that the following schedules have
been correctly prepared for this asset using
(1) the straight-line method, (2) the sum-of-
the-years'-digits method, and (3) the double-
declining-balance method.
Year Straight-Line Sum-of-the-
Years'-Digits Double-Declining-
Balance

4. 1 $11,970 $19,950 $26,600
2 11,970 15,960 15,960
3 11,970 11,970 9,576
4 11,970 7,980 5,746
5 11,970 3,990 1,968
Total $59,850 $59,850 $59,850
10) What is the cost of the asset being
depreciated? (Round answer to 0 decimal
places, e.g. 45,892.)
Cost of asset $
11) If there is any salvage value and the
amount is unknown (as is the case here), the
cost would have to be determined by looking
at the data for the double-declining balance
method.
12) What amount, if any, was used in the
depreciation calculations for the salvage
value for this asset? (Round answer to 0
decimal places, e.g. 45,892.)

5. 13) Which method will produce the highest
charge to income in Year 1?
The method that produces the highest charge
to income in Year 1 is
14) Which method will produce the highest
charge to income in Year 4?
The method that produces the highest charge
to income in Year 4 is
15) Which method will produce the highest
book value for the asset at the end of Year 3?
The method that produces the highest book
value for the asset at the end of Year 3 is
16) Prepare the journal entry (if any) to
record the impairment of the asset at
December 31, 2014. (If no entry is required,
select "No entry" for the account titles and
enter 0 for the amounts. Credit account titles
are automatically indented when amount is
entered. Do not indent manually.)
17) If the asset is sold at the end of Year 3,
which method would yield the highest gain
(or lowest loss) on disposal of the asset?

6. The method that will yield the highest gain
(or lowest loss) on disposal of the asset if the
asset is sold at the end of Year 3 is
18) Muggsy Bogues Company purchased
equipment for $224,700 on October 1, 2014. It
is estimated that the equipment will have a
useful life of 8 years and a salvage value of
$24,720. Estimated production is 39,600 units
and estimated working hours are 20,200.
During 2014, Bogues uses the equipment for
590 hours and the equipment produces 1,100
units.
Compute depreciation expense under each of
the following methods. Bogues is on a
calendar-year basis ending December 31.
19) Presented below is information related to
equipment owned by Suarez Company at
December 31, 2014.
Cost $ 20,232,000
Accumulated depreciation to date 2,248,000
Expected future net cash flows 15,736,000
Fair value 10,790,400

7. Suarez intends to dispose of the equipment in
the coming year. It is expected that the cost of
disposal will be $ 44,960 . As of December 31,
2014, the equipment has a remaining useful
life of 4 years.
20) The following data relate to the
Machinery account of Eshkol, Inc. at
December 31, 2014.
Machinery
A B C D
Original cost $108,560 $120,360 $188,800
$188,800
Year purchased 2009 2010 2011 2013
Useful life 10 years 15,000 hours 15 years 10
years
Salvage value $7,316 $7,080 $11,800 $11,800
Depreciation method Sum-of-the-years'-digits
Activity Straight-line Double-declining
balance
Accum. depr through 2014* $73,632 $83,072
$35,400 $37,760

8. *In the year an asset is purchased, Eshkol, Inc.
does not record any depreciation expense on
the asset.
In the year an asset is retired or traded in,
Eshkol, Inc. takes a full year’s depreciation on
the asset.
21) Mandall Company constructed a
warehouse for $280,000 on January 2, 2014.
Mandall estimates that the warehouse has a
useful life of 20 years and no residual value.
Construction records indicate that $40,000 of
the cost of the warehouse relates to its
heating, ventilation, and air conditioning
(HVAC) system, which has an estimated useful
life of only 10 years. What is the first year of
depreciation expense using straight-line
component depreciation under IFRS?
22) Francisco Corporation is constructing a
new building at a total initial cost of
$10,000,000. The building is expected to have
a useful life of 50 years with no residual value.
The building’s finished surfaces (e.g., roof

9. cover and floor cover) are 5% of this cost and
have a useful life of 20 years. Building
services systems (e.g., electric, heating, and
plumbing) are 20% of the cost and have a
useful life of 25 years. The depreciation in the
first year using component depreciation,
assuming straight-line depreciation with no
residual value, is:
23) Which of the following statements is
correct?
Both IFRS and GAAP permit revaluation of
property, plant, and equipment.
IFRS permits revaluation of property, plant,
and equipment but not GAAP.
Both IFRS and GAAP do not permit
revaluation of property, plant, and
equipment.
GAAP permits revaluation of property, plant,
and equipment but not IFRS.

10. 24) Hilo Company has land that cost $350,000
but now has a fair value of $500,000. Hilo
Company decides to use the revaluation
method specified in IFRS to account for the
land. Which of the following statements is
correct?
25) Under IFRS, value-in-use is defined as: